Strong indications suggest that the Dangote Petroleum Refinery may not commence petrol production on Monday as previously scheduled.
Last month, Alhaji Aliko Dangote, President of Dangote Group, projected that the refinery would begin producing petrol between August 10 and 12, 2024. However, findings by The PUNCH reveal that the refinery, which has a capacity of 650,000 barrels per day, might not roll out petrol today.
Multiple officials close to the matter confirmed on Sunday that the refinery is on track to start producing Premium Motor Spirit (PMS) by the end of August. “Everything is set. The refinery will begin petrol production this month, but the challenge lies in maintaining a constant supply of crude oil to keep operations running smoothly,” one top official, who requested anonymity, told The PUNCH.
Further investigations reveal that the ongoing crude supply crisis could be a setback for the refinery, which was supposed to start supplying the much-anticipated petrol to the market today.
Meanwhile, PMS marketers are awaiting the refinery’s release of the product this week. The refinery is preparing to roll out petrol in August, while also expecting 29 million barrels of crude oil from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
Reliable sources involved in the matter confirmed that the refinery is fully prepared to release petrol this month, despite the crude supply challenges. However, they noted that the low supply of crude might impact the process.
“I can confirm that we will start selling PMS this August, although the low crude oil supply has been a consistent issue. But from the information I have, we are 100 percent ready to supply PMS,” one source stated.
Another source mentioned that the refinery is still awaiting the 29 million barrels of crude oil from the NUPRC. “The NUPRC has yet to fulfill the supply of the 29 million barrels promised to Dangote. The refinery is still waiting for that supply. Interestingly, the 29 million barrels were allocated on paper, but they never reached the refinery, even though the NUPRC claimed on Friday that the crude was supplied.
“Dangote refinery needs 15 cargoes for September, but only six have been supplied. Where will the remaining nine cargoes come from? They might have to import again. Although the President said local refineries should buy crude in naira, the rate is still based on the international market. So, what’s the difference?” she questioned.
Our correspondent learned that although Dangote will release petrol in August, the product may not be sold locally due to price discrepancies. Experts familiar with the situation noted that the current price offered by the Nigerian National Petroleum Company Limited for petrol is not competitive for traders.
“For Dangote to sell in Nigeria, the price must be competitive. Dangote sources crude at international rates, so selling below cost price locally is not viable. It might be more profitable to sell abroad than to sell at a loss in Nigeria.
“There’s a lot of politics in the oil and gas sector, which is severely affecting Nigeria. As former President Olusegun Obasanjo said, those benefiting from fuel importation are hindering Dangote’s efforts,” one expert stated anonymously.
Some refinery workers, who spoke reluctantly, confirmed that preparations for petrol sales are underway, but they were unsure of the exact date and price. “I’ve heard that PMS might be available by next week, but I don’t know the exact date,” one worker disclosed, requesting anonymity as they were not authorized to speak to the press.
The Dangote refinery is currently engaged in a dispute with the NUPRC over the alleged supply of 29 million barrels of crude oil. On Thursday, the Dangote Group accused the NUPRC of failing to effectively enforce Domestic Crude Supply Obligations, stating that the refinery had yet to receive sufficient crude locally.
In response, the NUPRC refuted the claim, stating that it had facilitated the supply of over 29 million barrels of crude oil to Dangote from January to June 2024.
According to the commission, nine refineries benefited from the 32,088,122 barrels of crude supplied, with Dangote alone receiving 29,047,098 barrels. The Warri refinery reportedly received 949,670 barrels; NDPR refinery got 823,395 barrels; Port Harcourt refinery received 471,123 barrels; Seplat-WPSOL refinery was allocated 419,541 barrels; and Waltersmith-WSPOL refinery got 296,353 barrels.
Other beneficiaries included the Edo refinery, which received 58,504 barrels of crude, and Du-port refinery, which got 22,438 barrels.
The NUPRC added that it would enforce its mandate if necessary, but it would not arbitrarily withdraw licenses due to the “sanctity of contract.”
In a swift response, the Dangote Group denied receiving 29 million barrels of crude from any source. Dangote Group’s spokesperson, Anthony Chiejina, stated, “We acknowledge the NUPRC’s statement that they facilitated the allocation of 29 million barrels of crude oil to the Dangote Petroleum Refinery and Petrochemicals. However, we wish to clarify that we have yet to receive these cargoes.
“Except for the term supply we negotiated bilaterally with NNPCL, the NUPRC has only facilitated the purchase of one crude cargo from a domestic producer. The rest of the cargoes we processed were purchased from international traders.”
Chiejina added that the refinery is simply asking to buy crude directly from Nigerian producers rather than through international middlemen.
“Unfortunately, the NUPRC has admitted in their statement that they are unable to enforce the domestic crude supply obligation as specified in the PIA, citing the ‘sanctity of contracts’ as a reason,” Chiejina stated.
On Sunday, NUPRC spokesperson Olaide Shonola told our correspondent that the commission was investigating the refinery’s claims that it did not receive the allocated 29 million barrels. “We are looking into this,” Shonola said, promising to provide an update later.
As August progresses, Nigerians are beginning to wonder if the Dangote refinery will be able to supply petrol this month, as promised by Alhaji Aliko Dangote.
Concerns are growing due to the ongoing crude supply crisis, which has affected the refinery since it began operations a few monthsago.
Dangote has postponed the supply of PMS several times since the refinery began producing diesel and aviation fuel in April.
In May, Dangote assured Nigerians that fuel importation would cease once the refinery started supplying petrol in June. During the Africa CEO Summit in Rwanda, Dangote promised that the refinery would put an end to the monthly importation of approximately one billion liters of PMS in Nigeria from June.
According to Dangote, once the refinery is fully operational, Nigeria will no longer need to import petrol starting in June. He stated, “Right now, Nigeria has no reason to import anything other than gasoline (petrol), and by sometime in June, within the next four or five weeks, Nigeria shouldn’t import a single drop of gasoline.
“We have enough gasoline to supply the entire West Africa, enough diesel for West and Central Africa, and enough aviation fuel to supply the entire continent and even export some to Brazil and Mexico.
“We have already started producing jet fuel and diesel, and by next month (June), we’ll be producing gasoline. This will allow us to process most African crude.”
In June, Dangote informed Nigerians that his plan to release petrol into the market in the sixth month of the year would no longer be possible, sparking reactions from the public.
During a tour of the refinery with Lagos State Governor Babajide Sanwo-Olu and other dignitaries, Dangote announced, “We experienced a slight delay, but PMS will start coming out between July 10 and 15. We want to store it in the tank to ensure it settles. So, by the third week of July, we’ll be ready to release it to the market.”
However, this did not happen in July, as Dangote later told reporters that petrol supply was delayed by a fire incident at the refinery’s effluent treatment plant on June 26. He then projected that petrol would be available between August 12 and 15.
Marketers Await Dangote
Meanwhile, petroleum marketers in Nigeria are still waiting for an update from the refinery on when it will begin releasing petrol.
Both major and independent marketers have expressed interest in purchasing PMS from Dangote, especially after years of relying on the Nigerian National Petroleum Company Limited for petrol.
Clement Isong, Executive Secretary of the Major Energies Marketers Association of Nigeria, told The PUNCH on Sunday that major marketers are still waiting to hear from the Dangote Group.
According to him, MEMAN members are currently purchasing PMS from the NNPC, while most are sourcing diesel and aviation fuel from the Dangote refinery.
“We are still waiting for them. Currently, the NNPC is the only importer of PMS due to the price differential. So, we are waiting for the Dangote refinery.
“Presently, we are all buying AGO (diesel) and ATK (aviation fuel) from the Dangote refinery. To the best of my knowledge, marketers are not yet buying PMS,” Isong stated.
Crude Crisis
The Dangote Group’s management has alleged that International Oil Companies (IOCs) are still frustrating crude supply to the 650,000-capacity refinery.
The group claims that IOCs insist on selling crude oil to its refinery through their foreign agents, arguing that local crude prices will continue to rise because the trading arms offer cargoes at $2 to $4 per barrel above NUPRC’s official price.
The group also claims that foreign oil producers appear to prioritize Asian countries when selling the crude they produce in Nigeria.
Devakumar Edwin, Vice President of Oil & Gas at Dangote Industries Limited, stated, “If the Domestic Crude Supply Obligation guidelines are diligently implemented, this will ensure that we deal directly with local producers, who should be able to supply us with the required crude oil instead of us importing crude or buying it from trading arms or trading companies.
“By allowing us to deal directly with local producers, the cost of logistics and other risks will be eliminated, and the country will benefit from increased revenue in the process.”
However, the NUPRC claimed that there was no law mandating crude producers in the country to supply crude oil to any specific refinery, including the Dangote refinery. The commission added that the Dangote Group should make a business case with the producers to supply crude to the refinery, as the Nigerian Oil Industry Act recognizes the sanctity of contracts.
International crude traders have, in the past, hijacked Nigeria’s crude supply chain, selling crude to local refineries at international market prices. Local refiners like Dangote Refinery have since had to import crude oil and other intermediate products to meet production targets, despite being able to source these products locally.
Additional Reports by Okechukwu Nnodim
